Wood Pellet Manufacturing is Risky Business and it Just Got Even Riskier

In just the last two years or so, the wood pellet export industry in the US has exploded to meet spiking demand in Europe, where utility companies are phasing out coal and phasing in wood as a primary fuel source for electricity. Almost overnight, a multitude of new companies no one has ever heard of have incorporated and set up manufacturing facilities that are turning trees from America’s forests into wood pellets to supply this new global market.

The US South is ground zero for this new phenomenon, where wood pellet exports jumped from over a million to three million tons in roughly the past year. UK utilities like Drax, are way out in front, actively converting coal boilers to wood and co-firing wood along with coal. In the absence of enough forests in Europe to supply the fuel needed to run these giant power plants, Drax and others rely on imported wood in the form of pellets from elsewhere, particularly the US South. Scrambling to be the leader in this new market is Enviva, the South’s largest wood pellet manufacturer and supplier to Drax. Enviva and Drax are now working in concert to increase investment in the expansion of two port facilities on the coast of North Carolina.

Just how stable is this market? What are the economic risks to investors? What kind of long-term impacts will this industry have on economic development in coastal and rural communities across the South?

The very existence of this market hinges on government policy propped up by huge government subsidies. In Europe, government mandates to reduce carbon emissions and retire coal burning power plants combined with massive government subsidies for renewable energy have combined to create the new global market for wood pellets. Companies like Drax and Enviva are pointing investors to industry projections that exports from the South will reach as high as ten million tons in the next three years.

Hmmm… not so fast. This is one market whose very existence depends on its ability to deliver real, verifiable environmental benefits. Yet, at the same time this market is taking off, a mounting body of scientific evidence has emerged documenting that burning trees for electricity could actually increase carbon emissions when compared to coal and other fossil fuels. Environmental organizations across the US and Europe have joined forces to stop the burning of trees for electricity in favor of low carbon intensive alternatives, such as solar and wind. Government is starting to take notice, and investors are soon to follow.

In just the past two weeks, the UK government announced a cap on the construction of new wood burning power stations, and all government subsidies for biomass will come to a screeching halt in 2027. In an article that ran in BBC on July 16, 2013, Ed Davey, the UK’s Energy Secretary stated, “Making electricity from biomass based on imported wood is not a long-term answer to our energy needs – I am quite clear about that.” A similar signal came out of the Netherlands last week with news of an Energy Agreement that was signed by employers, labor unions, energy companies, governments, NGOs and others announcing that as five coal power plants close, the co-firing of biomass will be capped so that it will stay relatively small as the country focuses on a scaled-up reliance on wind power. Even here in the US, where utilities like Dominion Power are burning wood as a fuel source, a federal court, citing scientific studies demonstrating significant carbon emissions from burning trees, reversed an EPA rule exempting biomass from carbon regulations under the Clean Air Act.

Clearly, the writing is on the wall – the recent market boom is going to bust and investors won’t want to get caught in the bubble. Within an evolving policy context where the science is in direct contradiction to the business model, it’s likely we’ll see even more restrictions on tree burning and associated wood pellet exports in the next few years, making new investments pretty risky.

Take a look at this video of Gainesville Mayor Braddy calling biomass a scam:

[youtube]http://www.youtube.com/watch?v=kCeQliTMfQg[/youtube]

Of perhaps greater importance, however, are local communities where these wood pellet facilities are locating. The prospect of new jobs is enticing, but what happens in 15 years when the government subsidies run out and the demand for wood as a fuel source dries up? What happens when even tighter restrictions on biomass in Europe are enacted and demand shrinks in the nearer-term? Local communities will be left with a degraded landscape of destroyed forests and countless hardworking folks will lose their jobs. Hard-earned tax dollars will have been wasted, burned up in smoke in European power plants along with the surrounding forests. Wood pellet manufacturing is not only not the path to a clean energy future, it’s also not the path for community economic revitalization or long-term economic stability.

Drax, Enviva and others are painting a much rosier economic picture. After all, they are the front-runners, and they have already sunk a lot of money into this market. Investors will most likely increasingly take their financial forecasts and market projections with a grain of salt. Hopefully, local economic development agencies across the South will do the same.

Danna is the founder of Dogwood Alliance. For over 20 years, she has been at the forefront of forest protection in the US, leading hard-hitting campaigns and negotiating ground-breaking forest protection commitments from some of the largest companies in the world. She is a leading voice connecting the dots between climate change, forest destruction and social justice and pushing for forest protection in the US at a scale necessary to meet the sustainability challenges of the 21st Century. She holds a law degree from Emory University.

12 Responses to “Wood Pellet Manufacturing is Risky Business and it Just Got Even Riskier”

My concern with your movement is your consistent failure to cite sources for your claims or your photographs. I can find no empirical evidence to support the idea that forests are being “clear-cut” to produce wood pellets, or that there is a “mounting body of scientific evidence” that biomass fuels produce far greater carbon emissions than coal.” I suspect if one follows the money, your operation to attack the CPP and the biomass fuel industry is actually funded by the producers of fossil fuels. I’ll be working on that, and when I can return with facts to support my suspicions, I will report them to anyone who will listen.

Quote From Article: “this market is taking off, a mounting body of scientific evidence has emerged documenting that burning trees for electricity could actually increase carbon emissions when compared to coal and other fossil fuels.”

I wonder if the so called “scientific EVIDENCE”, is from the same Scientist that sent out all the FALSE Global Warming Info and Data, that the media didn’t hardly talk about in the news.

We all know that we have to be good stewards over our environment. But the Liberals and Environmentalists think that they can operate from a different set of rules and distort the truth. Look at the BIG EPA spill that just happened. If that was a company or a tax paying private citizen, they would be locked up in jail right now. SO WHY HAS THE HEAD OF THE EPA OR THE HEAD OF THE DEPARTMENT THAT COMMITTED THE SPILL NOT LOCKED UP???????????? ALSO, IS THE EPA GOING TO FINE ITSELF??????????????

Such a double standard when the shoe is on the other foot!!!!!!!!!!!!!! FOLKS WE ARE REPEATING HISTORY AND DESTROYING OUR SELVES FROM WITHIN JUST LIKE ROME DID!!!!!!!!!!

Well put; take a course before you hug a tree. This is not the Brazilian rain forest. It’s called Forest management. Pretty much the law anywhere on this continent. you have to grow one (or two or three) before you can cut one down. In some places the trees just outgrow the demand. And once again, point two; pellets are made from lumber mill waist, sawdust. Know one is chewing up trees to make pellets. They would have no chance of competing in this market place that makes pellets out of cheap sawmill waist. The cost to do that would be higher than making dimensional lumber. Can you imagine paying board foot prices for wood pellets. Pellets sell for $200-$300 a ton because they are made from wood waist, and compete with other fuels at that price.

I am new to this subject and I work in an unrelated field. In fact, I stumbled onto your dogwood website after conducting a web search for the word dogwood. I want to preface that I am not from this industry so my knowledge is limited. In any case, I am curious are other biomass materials less damaging to the environment in terms of carbon emissions. For example, what is the current research on utilizing hemp as creating a burnable biomass product. Would burning hemp reduce on carbon emissions compared to burning wood, sawdust, coal, oil, gas, etc. The reason why I ask is that I heard that a hemp see grows into a plant relatively quickly not sure on the exact time frame, but I heard it becomes a plant in a few months. If hemp produced less carbon emission compared to burning of other energy sources this may be a viable option. I am a new to this field, and I did accidentally stumble onto your site so I am not sure if my thoughts regarding hemp being used as biomass pellet makes sense. I am open to an idea feedback. By the way I searched the word dogwood, because I am a dog lover and own a dog daycare Boston Dog Company. I only serendipitously found your website. I am glad that I did find it. There is definitely a lot of interesting information. I am from Boston and when I think alternative forms of energy besides gas and oil I only think of solar or wind power. I didn’t realize there was such a large market for wood pellets. I will visit this website again, but if someone wanted to reply directly to me with an answer, comment or question you can visit my website http://www.bostondogcompany.com or send me an e-mail to [email protected]. I think this subject is important as cliched as it sounds we only have one environment and thats the truth.

As the superintendent for a major pellet producer this really hits home, the thing people need to remember is that during lumber production, sawdust is created. Most pellet plants use this by-product as the primary source for pellet production. If you think back about 15-20 years the bulk of this by-product (sawdust) was stuffed into a silo and burned. This was the only way to dispose of lumber waste. The pellet industry has not only helped in decreasing the need to dispose of this resource in a wasteful way, but has created hundreds of thousands of jobs over the last two decades. Also this is a renewable resource, as I stated earlier it is a by-product process, relying heavily on the lumber industry. The very notion that this industry is going to destroy the forests is nothing short of ludicrous.

If you close this industry down tens of thousands of jobs will be lost. This in turn only causes a bigger problem because we know there wont be an equal amount of jobs created that were lost. Therefore the skilled laborer is becoming less and less. Only pushing manufacturing to another country to only be imported back to the USA because we stopped production. Or you have created an equal amount of jobs that are lost but the ones who lost there job don’t meet the qualifications to perform the new job. So you raised unemployment and made the economy more fragile.. That’s the AMRERICAN way it seems….

I see your point Danna. Maine can’t afford to lose jobs, we are a very poor state that is under populated. We have a high elderly, and mentally disabled population. Wind mills and solar are great but right now only the rich and wealthy can get that in their house. One other thing, Maine is all forest, we have some of the thickest forest in the U.S. Our Mountains look like it’s carpeted because there are so much trees. Lumber is one of our most important industries. We are not stripping our forest. Pellets are important both financially and physically. My husband worked at a pellet mill now he is working on the gas pipe line. There is no magic answer. None of the ways are perfect. Like my husband has said even clean gas is still dirty. Windmills are loud and disturbing. The goal is to let up on the use of oil and try other methods. The emissions can be cleaner in the air if machines and factories are up to date. I hope I made sense. Sincerely, TC

Oh please…….what a great use for sawdust be it a primary or byproduct. I am assuming that we should also protect the Aspen tree which dies off every 35-45 years and then regenerates itself. You enviro-nuts should take a few courses in forestry.

Out of the frying pan w/International Paper and into the fire with Drax/Enviva!! Thanks to Danna and Dogwood Alliance for continuing to connect the dots for us between our endangered (and INvaluable) southern forests and the persistent corporate/industrial bad actors who continue to exploit the most bio-diverse forests on the planet for their near-sighted, short term, profit/loss objectives. All the more sinister when they do it in the name of “green/clean” energy.